**Key points** - The fiscal multiplier measures how much total output changes per unit of government spending. A multiplier above 1 means the spending sets off further rounds of activity beyond the initial injection. - The mechanism is circular: government spending becomes someone's income, that person spends part of it, which becomes someone else's income, and so on in shrinking rounds. - The size of the multiplier depends on how much of each round leaks out of the circular flow. Saving, taxat
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